Cool Hand, Warm Heart

Mary Deatherage of Morgan Stanley Smith Barney keeps her focus on the long term. Why she's investing in solutions to the world's water shortage.

By

Alexander Eule

August 4, 2012

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The news was bad: Spain's debt woes had returned to the headlines, and the Dow was off 100-plus points for the second day in a row. But the phones were strikingly quiet in Mary Deatherage's office in Little Falls, N.J. And that's the way she designed it.

The Morgan Stanley Smith Barney financial advisor says her clients have learned to take short-term setbacks in stride; they don't call in a panic. "We made a strategy in times of sanity, so we're not going to change it in times of insanity," she says.

Deatherage, who serves 150 clients with median accounts of $5 million, has made a point of impressing on her flock that this is not 2008. Back then, it was companies making the big mistakes; today, it's countries. That means there are high-quality companies, even in Europe, being dragged down unnecessarily. "We're encouraging people to get into the equity markets," she says. "We're gradually adding in, so we're kind of averaging out a lot of the volatility as we go."

ENLARGE

Conviction: "We made a strategy in times of sanity, so we're not going to change it in times of insanity."
Peter Murphy for Barron's

At the same time, Deatherage and her six-member team have been shortening up bond maturities in client's portfolios; those now range from 1.5 years to four years. "Interest rates might not go up anytime soon, but I'm more than willing to be closer to the ground when rates go up," she says.

Deatherage, 58 years old, learned long ago how to navigate unfamiliar terrain. She began her career in the 1970s as a teacher in the Panama Canal Zone. A decade later, having earned a CPA, Deatherage became an accountant at Coopers & Lybrand. As a woman there, "I was definitely the lone ranger," she says.

In 1986, she became a financial advisor at the firm known as Shearson Lehman/American Express. Her practice prospered through the upheaval of mergers, acquisitions and spinoffs that eventually brought Shearson into the Smith Barney fold.

Deatherage ranked 19th in Barron's most recent listing of Top 100 Women Financial Advisors. She's been in the top 20 every year since the list began in 2006. Since our first ranking, her team's assets have doubled to $1.7 billion.

She believes that being female is a "big advantage" because both men and women are more likely to open up to her with private concerns, both financial and personal. "I'm not so sure two guys would do that with each other in the same way," she says.

The Strategy

Location: Little Falls, N.J. Median Account: $5 million Clients: 150

Deatherage's client portfolios often have a solid dose of nontraditional investments.

ENLARGE

Those close ties have put Deatherage in the middle of some very private moments. She recalls holding a dying client's hand on a Thanksgiving night because his children were in California. On one Christmas, she helped an 85-year-old client bail out her son from jail: "She was too embarrassed to ask her friends and too nervous to drive herself."

RIGHT NOW, DEATHERAGE is taking a shine to investments in water, a commodity she thinks could become scarcer than oil as the global population explodes. Only 2.5% of the world's water is fresh water, she points out, and of that, only 0.25% is readily accessible.

"We could be early on this, but I'd rather be early than late," she says. "It makes me feel thirsty to think about it."

Deatherage likes water-related infrastructure companies and certain public utilities but won't specify names. One way for investors to play the long-term trend is through ETFs like the PowerShares Water Resources portfolio (ticker: PHO).

The advisor is also bullish on emerging-market debt, saying it's safer than many think. The economies of developing nations grew without the help of leverage, she notes, because banks wouldn't lend to them. "So if you're looking at some emerging-market debt, it's actually in many ways like thinking about U.S. debt back in the '60s."

Water investments and emerging-market debt are both among the "nontraditional" holdings in clients' portfolios. Including such other assets as global real estate, this category often makes up 35% of the holdings, though Deatherage emphasizes she doesn't force any one investment model on clients.

Most of Deatherage's client relationships begin with a meeting that has little to do with investments. Instead, she asks families to step back from their busy lives and assess their long-term goals. "The inertia of your life means that you're always going a thousand miles an hour," she says. Deatherage can't change those fast-paced lives, but she's happy to provide a seat belt.

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